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BBC MUNDO RADIO
By Daily Mail Reporter
Last updated at 6:43 PM on 19th April 2011
- Markets begin to recover following the outlook downgrade
- White House says budget deficit consensus is more likely than Standard & Poor's ratings agency predicts
- President Obama proposes long-term cuts of $4trillion by trimming domestic spending and raising taxes on the wealthy
President Obama is facing a tough job as he tries to convince voters that Washington will sort out its debt problem following a market-tumbling debt warning.
He is on the campaign trail in Virginia after ratings agency Standard & Poor's told the U.S. government it had revised its long-term outlook from 'stable' to 'negative'.
The leading agency said the government was at risk of losing its sterling credit rating and stock markets around the world have been falling, including the Dow Jones.
Big job: Mr Obama is on the campaign trail in Virginia after leading agency Standard & Poor told the U.S. government it had revised its long-term outlook
However global markets began to recover on Tuesday following the shock downgrade, with the Dow Jones opening 0.36 per cent higher.
But economists warned that doubts about the country's creditworthiness could still threaten the dollar's position as the global currency.
The White House has been trying to keep spirits high and Treasury Secretary Tim Geithner told Fox News there is no risk the U.S. will lose its AAA credit rating.
But Douglas Holtz-Eakin, former Congressional Budget Office director for George W. Bush, said the news will cause problems in getting investment from job creators.
‘No one can portray this as good news when a rating agency decides to go public with its reservations,’ he said.
Mr Obama gave a talk at a community college in Virginia today, is speaking later at the Facebook headquarters in California and then goes onto Reno, Nevada, on Thursday.
Smiling: The White House has been trying to keep spirits high since the announcement and downplay the risk the U.S. will lose its AAA credit rating
His trip to Virginia follows latest polls showing he would theoretically beat potential rival Donald Trump by 15 percentage points in a presidential election.
S&P’s assessment comes from the idea that a budget agreement sorting out the long-term deficit and debt problem may not be reached until after the 2012 election.
But the Obama administration says a consensus is more likely than S&P thinks.
‘We think that the political process will outperform S&P expectations,’ White House Press Secretary Jay Carney said.
‘When the issues are important, history shows that both sides can come together and get things done.’
He cited President Ronald Reagan with Tip O'Neill, President Bill Clinton with Newt Gingrich, and President Obama with John Boehner as examples of agreements.
Protests: A man calls for less government spending in Chicago, with Mr Obama looking for a long-term deficit-reduction target of $4trillion in 12 years
Mr Obama is looking for a long-term deficit-reduction target of $4trillion in 12 years, while Republicans are looking for slightly more than that in 10 years, he said.
He wants to trim domestic spending, including defence, and raise taxes on the wealthy while squeezing savings from federal healthcare programmes.
Mr Obama claims his plan spreads the burden more fairly than the Republicans.
They want to trim roughly the same amount of spending through budget cuts and an overhaul of Medicare and Medicaid healthcare programmes.
House Republican Leader Eric Cantor has criticised Mr Obama’s economic ideas as ‘high on partisan attacks and low on solutions’.
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